Mr. Bouteilles Gerbeuses has been your long-time tax client. He has amassed an impressive portfolio of real estate, securities, and joint venture investments. His net worth is substantial. Despite all his material well-being, Mr. Gerbeuses wants to take on a new challenge that of producing fine wines.
He already owns several hundred acres of agriculturally zoned land in the wine producing region of the Noir Valley. It happens to adjoin his home in the Wemadeit Country Club and Retirement Resort subdivision. He expects his start-up capital investment to be over $5 million and does not expect the first harvest to take place for at least seven years after the initial planting of grape vines. He expects to offset any losses by his other income.
Assuming Mr. Gerbeuses comes to you for tax advice on his new wine venture, what tax advice will you provide, and what, if any, ethical issues should be considered? As you work to identify ethical concerns and applicable areas of taxation that Mr. Gerbeuses may require guidance and counsel in, consider the following ideas:
Does placement of this personal property into business use present any tax benefits or consequences for the property owner?